Help! Trying to figure out if I'm missing something or if the Ballast answer on Project Management Practice Exam Question # 117 is incorrect in its approach:
Project construction budget: $3,125,000 with an architectural design fee of 10% ($312,500)
Consultants, indirect labor, allowance for profit & non-reimbursables is $162,500 leaving $150,000 remaining for architect's compensation for work on the project.
Architect decides 20% should be allocated for Design Development (20% of $150,000 = $30,000)
The hourly billing rate for each of the 5 employees working on the project is $125/hr; each employee works 40 hr/wk and is dedicated solely to this project with a utilization rate of 75% (= 30 direct labor hours/week). Their firm multiplier is 2.5x the direct labor expense used to determine the billing rate.
Based on this info, what is the minimum number of weeks that should be scheduled for the DD phase?
The answer they provide is 4 weeks based on using the direct labor expense of each employee of $50/hr ($125/hr / 2.5). Wouldn't using this direct labor number (vs $125/hr to include the multiple for profit, overhead, etc) mean you're losing money? You wouldn't bill your client your direct labor cost...
I tried to work backwards from their answer:
4 weeks x 30 hr/week per employee x $125/hr x 5 employees = $75,000 billed to the client for Design Development when you've only allotted yourself $30,000
Any clarity is appreciated :)
Please sign in to leave a comment.